Amazon.com, Epix Deal Includes Pay-For-Performance

Amazon.com (AMZN) is willing to pay cable network Epix generously for a deal it struck in September to purchase streaming movies, according to a report from Reuters.

An executive close to the deal told Reuters in a Tuesday story that Amazon agreed to a generous earn-out provision payable to Epix over time if the number of subscribers to Amazon's Prime Instant Video service rises above a certain threshold. Analysts say what makes this interesting is that the sweetener comes in addition to a fixed upfront fee, which is the way most subscription video-on-demand deals make money. Reuters said the new pay-for-performance provision "could transform the way such deals are done."

Amazon's apparent willingness to spend more money on the deal is being taken by analysts as a sign the e-commerce giant is under pressure to find more lucrative sources of video revenue, as the market for DVDs keeps shrinking as consumers shift to the streaming videos.

Amazon signed a deal with Epix on Sept. 4 to feature movies on their streaming service, in a move against rival DVD and streaming video provider Netflix (NFLX). The multiyear licensing pact between Amazon and Epix provides Amazon with thousands of new movies and TV episodes such as "The Avengers" and "The Hunger Games" that can be shown on its Prime Instant Video service. It's available to consumers who pay Amazon $79 per year as part of its free two-day shipping program. Some movies are free, others are available for purchase or rental.

The Amazon-Epix deal was announced three days before Amazon rolled out its latest Kindle Fire HD tablets on Sept. 7. The new devices come with Prime Instant Video, as Amazon goes after content sales, as IBD reported.

Amazon inked the deal with Epix after an earlier agreement between Epix and Netflix expired. Before that, Netflix had been paying Epix about $200 million annually since 2010 to be the exclusive streamer of Epix's movies.

Amazon.com (AMZN) is willing to pay cable network Epix generously for a deal it struck in September to purchase streaming movies, according to a report from Reuters.

An executive close to the deal told Reuters in a Tuesday story that Amazon agreed to a generous earn-out provision payable to Epix over time if the number of subscribers to Amazon's Prime Instant Video service rises above a certain threshold. Analysts say what makes this interesting is that the sweetener comes in addition to a fixed upfront fee, which is the way most subscription video-on-demand deals make money. Reuters said the new pay-for-performance provision "could transform the way such deals are done."

Amazon's apparent willingness to spend more money on the deal is being taken by analysts as a sign the e-commerce giant is under pressure to find more lucrative sources of video revenue, as the market for DVDs keeps shrinking as consumers shift to the streaming videos.

Amazon signed a deal with Epix on Sept. 4 to feature movies on their streaming service, in a move against rival DVD and streaming video provider Netflix (NFLX). The multiyear licensing pact between Amazon and Epix provides Amazon with thousands of new movies and TV episodes such as "The Avengers" and "The Hunger Games" that can be shown on its Prime Instant Video service. It's available to consumers who pay Amazon $79 per year as part of its free two-day shipping program. Some movies are free, others are available for purchase or rental.

The Amazon-Epix deal was announced three days before Amazon rolled out its latest Kindle Fire HD tablets on Sept. 7. The new devices come with Prime Instant Video, as Amazon goes after content sales, as IBD reported.

Amazon inked the deal with Epix after an earlier agreement between Epix and Netflix expired. Before that, Netflix had been paying Epix about $200 million annually since 2010 to be the exclusive streamer of Epix's movies.

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